BlogWood: MT Archives

Workers lose ground to inflation

W!'s economy continues to squeeze the working class while the rich get richer. LA Times:

For the first time in 14 years, the American workforce has in effect gotten an across-the-board pay cut.

The growth in wages in 2004 and the first two months of this year trailed inflation, compounding the squeeze from higher housing, energy and other costs.
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This is the first time that salaries have increased more slowly than prices since the 1990-91 recession. Though salary growth has been relatively sluggish since the 2001 downturn, inflation also had stayed relatively subdued until last year, when the consumer price index rose 2.7%. But wages rose only 2.5%.

The effective 0.2-percentage-point erosion in workers' living standards occurred while the economy expanded at a healthy 4%, better than the 3% historical average.

Meanwhile, corporate profits hit record highs as companies got more productivity out of workers while keeping pay increases down.

Some see climbing profits and stagnant wages as not only unfair but also ultimately unsustainable. "Those that are baking the larger pie ought to see their slices expanding," said Jared Bernstein, an economist with the liberal Economic Policy Institute in Washington.
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The biggest factor is the slack employment market, which means there is little pressure on businesses to boost pay. "They take advantage of you because there's no work and anyone will work for anything," Romero said.

Although the unemployment rate has dropped to a relatively low 5.2%, that figure doesn't count the hundreds of thousands of jobless people who've given up their searches and dropped out of the labor market at a greater rate than anytime since 1988. At the same time, the cost of health premiums has skyrocketed, eating into the pool of corporate cash set aside for raises. Although pay rose only about 2.4% last year, benefit costs jumped almost 7%.

With benefits factored in, workers' total compensation did outpace inflation in 2004, even if they didn't see it in their paychecks. But employers also are requiring workers to pay a greater share of their premiums.

"Healthcare has eroded the wage base," said Janemarie Mulvey, chief economist with the Employment Policy Foundation, a business-funded think tank in Washington.

"In the long run, we can't continue like this. If healthcare keeps crowding out wages forever, something's got to give."

The squeeze is especially intense on the 47% of the workforce whose employers don't directly provide their health insurance. For lower-income workers, who are more likely to be uninsured, the falling value of their wages is even more serious because they're more likely to live paycheck to paycheck. And rising food and energy prices take a proportionately higher toll on the poor than on the rich.

How to Organize a Union in Your Workplace.

Health Care is a Human Right

Fight The Republican Low Wage Strategy.